Chronic skills shortages are driving up wages in many countries that are also
facing high and rising unemployment, in what is being dubbed a major
“economic paradox”, a global study reveals.

The United States, Germany and Sweden are among those countries experiencing rampant wage inflation because of an “acute talent mismatch” between candidates andjobs, rather than significant GDP growth, the report by recruiter Hays and Oxford Economics has found.

The three countries rank bottom on the Hays global skills index of 27 countries, although 16 of the economies featured suffer problems with labour supply and subsequent constraints on economic growth.

Belgium, Italy and Hong Kong are the top three countries on the index, although in Italy’s case, the poor economy means skills shortages are not yet exposed.

Britain fares slightly above average on the list, in 11th place, although Hays warns that acute skills shortages in the UK are being masked by the general lack of jobs and weak employer confidence.

Alistair Cox, chief executive of Hays, said: “Wage inflation will come in Britain as the economy recovers. The fact we’ve got unfilled jobs at the high end means economic growth is restricted.”

Mr Cox called on the Government to reverse its blanket policy on reducing immigration into the UK, as when the labour market eventually picks up, employers will need to find talent quickly. The long-term solution, he says, is to reform school education and better align training to industry needs, but in the short-term, employers need highly skilled migrant workers to plug gaps.

“The UK has to make sure it can recruit the very best people into roles regardless of where they come from. It is short-sighted to say 'let’s reduce immigration’. When you put a blanket restriction on migrant worker numbers, where people have no certainty over how long they can stay in the UK, it’s difficult for employers to be brave enough to build their research and development lab in the UK without going somewhere else,” he said.

Small and medium-sized businesses that have created the majority of new jobs over the past decade also need to see real cuts to red tape, Mr Cox said. “It is still too time-consuming and onerous to employ people in the UK,” he said.

The Hays chief executive added there was little indication of the UK labour market turning the corner in the near future. “It doesn’t feel as though the recovery is imminent,” he said.